Opinion/Analysis
Boost domestic spending
(China Daily)
Updated: 2009-11-25 07:53
The strong rebound of the Chinese economy as well as the ongoing recovery of the world economy from the worst global recession in many decades will certainly allow much more breathing room than a year ago for Chinese policymakers at the upcoming Central Economic Work Conference.
With economic growth having accelerated from 6.1 percent in the first quarter of this year - the slowest in almost a decade - to 7.9 percent in the second quarter and 8.9 percent in the third, China has ostensibly put itself back on the track of fast growth it has enjoyed over the past three decades.
The Chinese leaders' determination and efficiency in steering the world's third-largest economy through the global crisis is remarkable, not least in terms of shoring up the speed of economic growth.
However, the year-end Central Economic Work Conference is not only about reviewing economic achievements. More importantly, it will set the tone for next year's policy making.
Last year, the extraordinary turnaround in macroeconomic conditions - from overheating in the first half of the year to a sudden slowdown in the second - had left Chinese policymakers no choice but to focus on preventing a sharp slowdown of the national economy amid a worldwide slump.
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Yet, accelerated economic growth does not mean that the Chinese government has the job all done. The lingering uncertainty about the global recovery as well as the huge difficulty in transforming the country's growth pattern will require even greater efforts to press ahead with critical domestic reforms.
It is widely expected that policymakers will carefully review the current stimulus policies to decide the timing of exit strategies. But the fragility of the global recovery will largely refrain China from withdrawing stimulus measures too soon while rising inflation expectations at home make it risky to act too late.
In comparison, the more certain and compelling task for the country is to shift more rapidly its economic model toward consumer spending from one driven by investment and exports. Increased Chinese consumer spending would not only sustain domestic growth but also help reduce global imbalances.
The combination of fiscal subsidies and tax credits has so far worked magic in fueling a consumption boon in certain domestic markets. But it is another thing to pursue consumer-led growth across the economy.
Policymakers are strongly urged to do their most in dismantling all institutional barriers like a pro-business income distribution system and an insufficient social welfare net that are still deterring Chinese consumers from loosening their purse strings.
